The Norwegian Government Pension fund Global, also known as the Norwegian Oil Fund and managed by Norges Bank Investment Management (NBIM), has recently published a new climate action plan to show how they plan to curb the climate crises and reach their long-term goal of Net Zero 2050 in their portfolio.
There are many good parts in this new climate action plan, and for those interested in climate and ESG, it is well worth a read. It’s interesting to see how NBIM’s new “engage to change approach” will play out in the coming years. A key measure for success will be how NBIM will use their shareholder rights and vote on climate-related resolutions and board of directors, on what and when they will file resolutions, and at what point they will decide that enough is enough and divest. Rest assured, all of this will be monitored closely in the coming years. It will also be scrutinised to see if they live up to the expectations of the Norwegian people and Parliament as a world-leading fund on sustainability and is actually on track to Net Zero 2050.
To start with, NBIM will mainly focus on 174 companies in their portfolio, totalling approximately 70% of their financed scope 1 and 2 emissions. We don’t know which 174 companies they are targeting yet. NBIM will also update their Climate Expectation Paper accordingly, a high-level guidance that forms the basis of its engagement with companies in its portfolio.
NBIM, which has about $1.2 trillion of assets under management, holds approximately 1.5% of all shares on the global market. So how they engage and vote will have a global impact. A recent paper by researchers at the University of Waterloo names NBIM as one of the “Ten financial actors that can accelerate a transition away from fossil fuels.” As NBIM, Blackrock, Vanguard and seven others collectively own 50% of global emissions potential, they “have the potential to influence the strategic direction and governance of these firms and should consequently be held accountable for financing the economic activities that contribute to climate instability”.
At a recent press conference Nicolai Tangen, the head of NBIM, warned investors of the “real danger” that global economic instability and political backlash in the US pose to driving climate risks down the investment agenda. Tangen clarified that “if you’re a large investor with a diversified portfolio, there is no way that you can run away from these problems. If you have one part of the portfolio that is polluting and destroying the environment, you’re going to be hit in another part of the portfolio”. Nobody can hide from climate change. In these times of ESG noise, strained energy situation and a troubled economy, let’s hope NBIM can use their strong position to lead, step up its game, and really engage to change. Time will tell.